I came up with 18% for the first question but am stuck on the standard devitatio

Question

I came up with 18% for the first question but am stuck on the standard devitation.

Barbara is considering investing in a stock and is aware that the return on that investment is particularly sensitive to how the economy is performing. Her analysis suggests that four states of the economy can affect the return on the investment. Using the table of returns and probabilities below, find

What is the expected return on Barbara%u2019s investment? (Round answer to 3 decimal places, e.g. 0.076.)

What is the standard deviation of the return on Barbara's investment? (Round intermediate calculations and answer to 5 decimal places, e.g. 0.07680.)

Barbara is considering investing in a stock and is aware that the return on that investment is particularly sensitive to how the economy is performing. Her analysis suggests that four states of the economy can affect the return on the investment. Using the table of returns and probabilities below, find

Probability Return Boom 0.6 25.00% Good 0.1 15.00% Level 0.2 10.00% Slump 0.1 -5.00%

Explanation / Answer

Expected Return=0.6*0.25 + 0.1*0.15 +0.2*0.1 + 0.1*-0.05=0.18 =18 %

Variance=0.6*(0.25-0.18)^2 + 0.1*(0.15-0.18)^2 + 0.2*(0.1-0.18)^2 + 0.1*(-0.05-0.18)^2

=0.0096

Standard deviation=sqrt(0.0096)=0.09798

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.